How to Sell a Haunted House

My partner, Arnie Herschorn, recently won a summary judgment motion in an interesting case involving a latent defect in a house.  At one time, the law permitted a person to sell a house that was deficient in some way, and even in a significant way, without disclosing the defect.  This fell under the framework of the term “caveat emptor” or “buyer beware”. 

It is possible for a court to recognize a disclosure obligation where certain types of convicted criminals live in the area, or there may be some other attribute that might impact a purchaser generally or a particular purchaser specifically, i.e. one with young children.

The law has come some distance since those days and now may well recognize an obligation not only to disclose latent defects affecting the structure of the dwelling, in some circumstances, but even defects having nothing to do with the integrity of the building itself but relating only to other circumstances affecting the property that might influence a purchaser.

In Arnie’s case, our clients purchased a home north ofTorontoin the summer of 2010.  They were a young couple with two young children.  After closing but before they moved in, they discovered that a man convicted of possession of child pornography resided across the street.  As a result, they did not consider that the house they had just purchased would be a safe place to live and they took action against the vendor and the vendor’s real estate agent, arguing that this information should have been disclosed to them.  Apparently, this fact was common knowledge in the neighbourhood.

The vendor brought a motion for summary judgment to dismiss the action on the basis that it could not possibly succeed based on the law ofOntarioas it present stands.  Arnie opposed the motion and won.  The judge ruled that an obligation to disclose this information, which might reasonably be seen as making the house uninhabitable by a purchaser with young children, might well exist in law and certainly deserved to be reviewed at a trial. 

Several weeks ago, my wife and I submitted an Offer to Purchase a vacation property in the Collingwood area.  Before doing so, the real estate agent informed us that a former owner of the property had committed suicide in the house. 

The transaction did not proceed although not for that reason.  Having said that, I found it interesting that the agent would recognize an obligation to make this disclosure.  As the law stands, real estate agents are obliged by statute to disclose anything they know affecting the value of real estate.  My assumption is that the agent gave us this information because she felt it might impact on our decision to buy the property or, at least, our decision as to what its value might be. 

I am not aware of a case in which the court has required disclosure of a possibility of a house being haunted because of a death that took place in it.  However, the ruling in Arnie’s case means that it is possible for a court to recognize a disclosure obligation where certain types of convicted criminals live in the area, or there may be some other attribute that might impact a purchaser generally or a particular purchaser specifically, i.e. one with young children.  The law may be evolving to the point at which vendors of property may be under the same obligation as real estate agents.  We are certainly a long way from caveat emptor.

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